Former Allentown City Controller Admits Role In Corruption Scheme

PHILADELPHIA – Mary Ellen Koval, 64, of Allentown, PA, pleaded guilty today to conspiracy to commit honest services fraud.  During the guilty plea hearing, Koval admitted the following:

Koval and Public Official #3 were public officials who represented the City of Allentown through elective offices.  Until her resignation last week, Koval had been the City Controller since 2012.  She was re-elected to a second four-year term in November 2015. 

Public Official #3 directed other public officials to identify for him individuals and entities who had profited from their dealings with the City of Allentown or who sought favorable treatment from the City of Allentown (“the vendors”).  Public Official #3 made clear to certain vendors, including Ramzi Haddad, Donor #1 and Donor #2 that providing him with campaign contributions was a necessary condition for receiving certain favorable treatment from the City of Allentown.  Indeed, Public Official #3 caused, agreed to cause, and attempted to cause other public officials, including Koval, Finance Director Gary Strathearn, and Assistant City Solicitor Dale Wiles, to take official action favorable to certain actual and potential donors to Public Official #3’s political campaigns. 

Upon learning of these practices, Koval should have put a stop to them.  As City Controller, she had a duty to exercise independent financial oversight of all City finances, including all expenditures by Public Official #3, and as a public official she owed the public a duty of honest services.  But Koval relied on Public Official #3 for political support, including campaign contributions and appointments to boards, commissions, and authorities including Allentown Parking Authority’s Board of Directors, of which she became Chair in January 2015.  Rather, than root out, report, and counter Public Official #3’s criminal activity, she instead agreed to enable, aid, and participate in it. 

Knowing that each of them wanted favorable treatment from the City of Allentown in return, Public Official #3 asked vendors, including Donor #1, Donor #2 and Ramzi Haddad, to raise large amounts of campaign contributions for him, which they did.  Koval agreed to use her official authority to help each of these donors because Public Official #3 wanted to reward and/or incentivize their campaign contributions.  For example, Public Official #3 took numerous steps to attempt to award a “no bid” city contract to Donor #1’s company, despite the concerns and objections of numerous other public officials in Allentown.  Because of Public Official #3’s desire to reward and incentivize Donor #1’s contributions, Koval tried to help Donor #1 through her position as City Controller and also through her influence with the Parking Authority.  In furtherance of the conspiracy with Public Official #3, Koval also used her power and authority as City Controller to help Donor #2 and Haddad. After Koval asked that Donor #2 also reward her with a campaign contribution for her participation in the conspiracy, Donor #2 obliged with a donation for Koval’s re-election effort. 

Koval and other members of the conspiracy attempted to conceal the conspiracy by making materially false statements to FBI agents who were investigating the conspiracy.  But within a few days of her initial interview with the FBI, Koval met with the agents in order to confess her guilt and take responsibility for her wrongdoing.  She then announced her resignation from the position of Controller for “the best interests of the City of Allentown and its residents.”

After accepting the guilty plea, United States District Judge Juan R. Sanchez scheduled a sentencing hearing for April 19, 2016.  Strathearn, Wiles, and Haddad all previously pleaded guilty.  Strathearn and Haddad are scheduled to be sentenced on April 14, 2016.  Wiles is scheduled to be sentenced on March 2, 2016.  Koval, Strathearn, and Wiles each face a maximum possible sentence of 20 years in prison, a fine, three years of supervised release, and a $100 special assessment.  Haddad faces a maximum possible sentence of 5 years in prison, a fine, three years of supervised release, and a $100 special assessment. 

This case is being investigated by the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigations, and the Pennsylvania State Police.  It is being prosecuted by Assistant United States Attorneys Joe Khan and Nancy Beam Winter.